Loading ...Coming crisis of confidence in dollars and fiat?
11. Next, imagine a confidence crisis in the US dollar more broadly. More complicated, you say? Yes and no. The same principles of collateral migration apply – only the collateral changes. In the case of a currency crisis, users are swapping US dollars for hard assets. It’s still a migration from one stablecoin to another, only the other is likely to be an asset like gold to negate the risk of inflation or devaluation. This “flatcoin” would be a move away from fiat currencies.
12. It would be the ultimate irony – a gold standard returns through the backdoor of crypto markets. It’s not a matter of likely or not. It’s a possibility. And creative minds are building in this direction. Like Quorium and its stablecoin backed by gold reserves that stay in the ground. In essence, the owner has a claim on proven reserves, with Quorium transforming an in-ground gold asset into a high-velocity store of value.
13. Pay attention – it’s the price of knowledge.
Quorium: Its a flawed model, as they propose a 1:1 peg such that one token is 100% backed by gold reserves, most of which are in the ground. That is, yet to be mined. They have not factored in that gold in the ground has to be extracted and refined to be priced at 1:1 peg. The cost of extraction and refining has to be factored in, including mine build capital, permitting and operating costs.
For this reason, reserves in the ground are valued at a significant discount to the actual price of gold.
Interesting, but the point to focus on is not the crypto(digital) form. It is the gold that gives the stability. So while I wouldn’t say that it can’t happen using crypto as the tool towards implementatation, the important part is the gold standard itself. If crypto ends up playing a role, it is just to help facilitate transactions. It could just as well be some type of central bank depository with audited gold holdings (possibly using blockchain) to facilitate transactions between nations conducting global trade. However it plays out, and there may be multiple platforms, for both institutional and individual purposes, gold will be the basis, as it always was before this failed experiment, in fiat only.